nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2006‒07‒21
five papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. Centralization or Decentralization of Decision Rights? Impact on IT Performance of Firms By Takahito Kanamori; Kazuyuki Motohashi
  2. Information Technologies (IT) Adoption and Localized Knowledge Diffusion: an Empirical Study By Rachel BOCQUET (IREGE, IUT-University of Savoie); Olivier BROSSARD (LEREPS-GRES)
  3. Innovation and the Determinants of Firm Survival By Hielke Buddelmeyer, Paul H. Jensen and Elizabeth Webster; Paul H. Jensen; Elizabeth Webster
  4. Small and Medium Enterprise in India - Overcoming Policy Constraints to Achieving Rapid Growth in a Globalizing Economy By Morris Sebastian; Basant Rakesh
  5. European Integration and Regional Specialization Patterns in Turkey's Manufacturing Industry By Sedef Akgüngör; Pinar Falcioglu

  1. By: Takahito Kanamori; Kazuyuki Motohashi
    Abstract: The effects of IT on the decision making structure of firms has been a topic of debate for decades. On the one hand, IT increases the information available to top management, and the coordination advantages that it provides may lead firms to centralize decision making. On the other hand, IT makes it possible to disseminate global information of the firm to line workers enabling them to make better decisions as well as enhances management's monitoring capability, favoring decentralization. In order to understand the economy wide effects of centralization and decentralization of decision rights on the productivity effect of IT, we conduct an empirical analysis to examine the change in the effects of IT performance in firms that changed its decision making structure, using a panel data set for 2,300 Japanese firms over 4 years. Our results indicate that both centralization and decentralization have a substantial productivity effect on IT for firms that changed its decision making structure and the productivity effects are more marked for firms that conducted radical change of decision rights. Moreover, we find evidence that changes in decision rights have a more pronounced productivity effect on large firms. Finally, our results show that productivity effects due to changes in decision rights are realized only in the non-manufacturing sectors. This paper sheds some light on the effects of decision rights on firms' IT performance and underscores the importance of organizational redesign accompanying IT investment.
    Date: 2006–07
  2. By: Rachel BOCQUET (IREGE, IUT-University of Savoie); Olivier BROSSARD (LEREPS-GRES)
    Abstract: We use a specially designed survey on French firms located in Haute-Savoie to provide empirical evidence suggesting that IT adoption is not only influenced by the traditional factors of technology diffusion (rank, stock-order, epidemic effects and complementary organizational practices) but also by local diffusion of knowledge effects. The data collected permit us to make several advances. Firstly, we study the adoption of several authentic Information and Communication Technologies while the recent empirical literature has mainly focused on computer capital stocks or automation tools. Secondly, we construct measures to replace the traditional epidemic effect by different proximity variables. Thirdly, we assess the real impact of proximity on the IT adoption process by examining different channels of knowledge transmission among nearby firms, from knowledge spillovers to well-regulated arrangements. Our econometric methodology is designed to deal with potential biases that are encountered when implementing technology adoption equations and testing practice complementarities. In particular, we explicitly deal with the problem of simultaneous technological choices, using bivariate adoption equations.
    Keywords: Localized knowledge spillovers. Proximity.Technology diffusion. IT adoption. Complementary organizational practices
    JEL: L2
    Date: 2006
  3. By: Hielke Buddelmeyer, Paul H. Jensen and Elizabeth Webster (Melbourne Institute of Applied Economic and Social Research and Centre for Microeconometrics, The University of Melbourne and IZA Bonn); Paul H. Jensen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and Intellectual Property Research Institute of Australia, The University of Melbourne); Elizabeth Webster (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and Intellectual Property Research Institute of Australia, The University of Melbourne)
    Abstract: While many firms compete through the development of new technologies and products, it is well known that new-to-the-world innovation is inherently risky and therefore may increase the probability of firm death. However, many existing studies consistently find a negative association between innovative activity and firm death. We argue that this may occur because authors fail to distinguish between innovation investments and innovation capital. Using an unbalanced panel of over 290,000 Australian companies, we estimate a piecewise-constant exponential hazard rate model to examine the relationship between innovation and survival and find that current innovation investments increase the probability of death while innovation capital lowers it.
    Date: 2006–07
  4. By: Morris Sebastian; Basant Rakesh
    Abstract: Sustained very high rate of growth (above 8% in the context today in India) would be able to achieve (since a labour productivity growth of 4 to 4.5 % is to be factored in) a labour absorption rate of 3.5 to 4% which is about a percent above the growth in the rate of the workforce. But slower growth of around 6% which is what India seems to be achieving in the 90s on an average would keep disguised unemployment alive for long. Similarly, the transformation of firms and especially SMEs which have little autonomous capacity is itself a function of growth oriented policies. In the nineties labour has been sufficiently flexible to allow rapid growth whenever demand was high. In any case the unorganised workers, did not have the ability to resist hire and fire. Demand has been lower than possible otherwise since the rupee especially in comparison to the East Asian currencies has not been aggressively priced. Lacking a very rapid growth in the market sufficient to overcome disguised unemployment, the transformation of these industries has itself been affected. Similarly the continuation of tariff inversion, high and uncompensated energy taxes hurt manufacturing and especially the small and medium sector whose dependence on relative factor cost is higher. The slow movement towards de-reservation has further attenuated the process. The dynamic inefficiencies and distortions are far more significant than the static efficiency penalty that the economy pays in the continuation of reservation. Without these corrections the move to have “free-trade” agreements with the ASEAN countries would hurt manufacturing in India and especially the SMEs. Many of the traditional small firms are in clusters, and a cluster oriented approach would be important for their success. A strategy based on leveraging trade names /brand names, many of which could be argued to be "geographic indicators", with much equity world wide, would require immediate changes in our intellectual property rights regime. Costs of excise registration and dealing with excise authorities are too large, and there is a 'fixed' component to this cost which cannot be spread over a large value of turnover. Only significantly lower excise rates for small firms could compensate them sufficiently. The criteria of "with and without the use of power" in the Factories Act, be entirely dispensed with. All units with more than 50 employees including the entrepreneur and family labour, be brought /retained under (all) the provisions of the Factories Act. And all other units be entirely exempt from its provisions. Credit is the single most important constraint for small firms. Incentivisation of priority sector targets is the solution. The policy of directed lending to small firms (the targets for priority sector lending) ought to shift from targets or quotas to incentives to banks for lending to small firms. Responsible risk taking in lending would have to re-emerge. Tax based incentives for banks and financial intermediaries are possible. Statutory Reserves based incentives for banks too are possible. Concessions on interest rates are dysfunctional, though the margin above PLR rates ought to be subject to a ceiling. State Finance Corporations which could play a crucial role in financing of SMEs would have to go through quick restructuring and refocus on promotion of new enterprises typically where vast positive external effects are anticipated, such as in technology based small firms, promising industries, nodal industries, industrial estate corporations, in exchanging specific infrastructural support to existing clusters of small firms, etc. Investments in infrastructure especially general roads, power, railways, and water supply would help to improve the performance of small firms significantly. For all small firms power and water continue to remain constraints shamefully after nearly 10 years of reform. These can easily come down at least for export industries if the taxes and cross subsidies on them are made vattable. Despite the Electricity Act 2003, it is shameful that open-access has not been extended to SMEs. Technology based and skill labour using industries such as IT, BT, pharmaceuticals and auto oriented industries, also need to be exploited. In automobiles taxes are still very large and the inverted tariffs / high cost of materials and energy that are uncompensated hurt the prospects of India emerging as a base for manufactures. In IT, Biotechnology, pharmaceutical industries and other related offshoring activities the challenges lie in bringing about better IPR regimes that reduces the risk faced by foreign firms in their operations in India. IPR regimes requiring much insight would have to be worked work out that is able to balance the interest of Indian firms and yet lead to much industrial relocation. The addition of a petty patent register could considerably enhance the extraction of value from the many innovations that take place in the SME sector. Municipal infrastructure is inadequate and its correction in at least a few cities is of crucial importance to the growth of the off-shoring activities and growth in these industries. Financial institutions could usefully develop strong venture capital arms to finance innovative small firms that have a good potential to emerge in the near future in many industries. Problems with government procurement which are ‘designed to fail’ keeps alive a very large market for shoddy goods among SMEs. Merging of the umpteen laws and regulations into one wherever feasible can reduce the currently large costs of SMEs in dealing with government.
    Keywords: Small-Firms; Industry-structure; India; SME; International-Trade; Globalisation; Country-studies; economic-development
    JEL: O1
    Date: 2006–07–11
  5. By: Sedef Akgüngör (Department of Economics, Faculty of Business, Dokuz Eylül University); Pinar Falcioglu (Department of Management, Isik University)
    Abstract: The dynamics of industrial agglomeration across the regions and the reasons for such agglomeration have been the focus of interest particularly in exploring the effects of economic integration of regions on the spatial distribution of economic activity. In this context, following the predictions of the literature on economic geography, Turkey’s integration with the European Union as a candidate member is a likely cause of changes in economic dispersion of the economic activity over the years. The major objective of the study is to complement the findings of the studies on industrial agglomeration in Turkey’s manufacturing industry by exploring whether specialization and concentration patterns have changed over time and to expose the driving forces of geographic concentration in Turkey’s manufacturing industry, particularly during Turkey’s economic integration process with the European Union under the customs union established in 1996. Industrial concentration and regional specialization are measured by GINI index for NUTS 2 regions at the 2-digit level for the years between 1992 and 2001. To investigate which variables determine industry concentration, the systematic relation between the characteristics of the industry and geographical concentration is tested. A regression equation is estimated, where the dependent variable is GINI concentration index and the independent variables are the variables that represent the characteristics of the sectors. The major finding of the study is that Turkey’s manufacturing industry has a tendency for regional specialization. Increase in the average value for regional specialization supports the prediction developed by Krugman that regions become more specialized with regional integration. But there is no evidence for increased industrial concentration in Turkish manufacturing industry, contrary to the expectations. As for the answer to which variables determine industry concentration, the analysis supports the hypothesis that the firms tend to cluster in regions where there are economies of scale and there are significant linkages between firms, supporting the predictions of new trade theory and economic geography.
    Keywords: Regional specialization, geographical concentration, economic integration, geographical economics
    JEL: L60 R10 R11 R12 R15
    Date: 2005–11–23

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